In recent years, there has been a growing debate over the legality of severance gag orders. These are clauses in severance agreements that prohibit employees from disclosing negative information about their former employers, such as their working conditions, pay, or treatment by management. This is our first real regulatory watch, severance gag legality questions, and insight ahead.
Proponents of severance gag orders argue they are necessary to protect employers’ trade secrets and confidential information. They also argue that they can help to prevent workplace disruptions and lawsuits. However, opponents of severance gag orders argue that they violate employees’ First Amendment rights to free speech and their right to organize and bargain collectively.
In 2023, the National Labor Relations Board (NLRB) issued a landmark decision that ruled that severance gag orders are illegal under federal labor law. The NLRB found that such clauses violate Section 7 of the National Labor Relations Act, which protects employees’ rights to organize and bargain collectively. The NLRB also found that severance gag orders can create a chilling effect on employees’ speech, discouraging them from speaking out about workplace issues for fear of retaliation.
The NLRB’s decision is considered a major victory for employees’ rights. It sends a clear message to employers that they cannot use severance gag orders to silence their employees. However, it is important to note that the NLRB’s decision does not apply to all severance agreements. Severance agreements that do not contain severance gag orders are still valid.
If you are an employee who has been asked to sign a severance agreement with a severance gag order, you should consult an attorney to discuss your legal rights. You may be able to challenge the legality of the severance gag order and negotiate a severance agreement that does not contain such a clause. In fact, if you are the employer, you should also consult your attorney as you have rights as well. These issues may also change at some point in the future, as we have seen many compliance and legal answers shift back and forth these past few years.
Keep in Mind
Here are some additional things to keep in mind about severance gag orders:
- Severance gag orders are not enforceable in all jurisdictions. In some states, such as California, severance gag orders are void as a matter of law.
- Even if a severance gag order is enforceable, it may not be enforceable against all types of information. For example, an employee may be able to disclose information about illegal or unsafe working conditions, even if the severance agreement contains a severance gag order.
- If you are an employer, you should carefully consider the pros and cons of including a severance gag order in your severance agreements. Severance gag orders can be helpful in protecting your trade secrets and confidential information, but they can also violate employees’ rights. You should consult with an attorney to discuss your legal obligations and options.
The questions about what is legal or enforceable, or required when it comes to NDAs or other documents can always change. What is legal one day may be illegal the next, and something never thought about might end up being required another day. This is why we are always watching the changes in compliance as it deals with your credit union, to give you the peace of mind that someone is watching out for the best interests of you and your members. We will offer more of these Regulatory Watch articles occasionally, so be sure to follow our blog!
